In my newest ebook, Worth It: How getting good at the money talk pays off I shared what might be my best advice about the most important money conversation to master: how to raise your rates.
Let’s first distinguish between increasing your rates overall and increasing your rates to specific clients.
As you get better at what you do and at attracting more and more of the ones who value your services, you will be able to increase your rates simply by inching them up as you go, a little bit with every new client.
So if last week you quoted $3750 for a project, try quoting $3850 or $4000 next time.
This practice prevents you from getting into a rut with your pricing and allows you to always be assessing what the market will bear.
It will also help you understand that the essential aspect of pricing is what a client values and is willing to pay, not what a project itself is intrinsically worth, which is arbitrary and relative.
On the other hand, when it comes to specific existing clients, who have already settled into an understanding of the relationship between your pricing and your value, raising your rates requires finesse.
If you value the relationship, you’ll need to help them understand what is changing, how and why -- and it’s a good idea to include them in the conversation too, rather than positioning your increase as “take it or leave it.”
If you don’t value the relationship and you’re increasing your rates as a backhanded way to get rid of them, that can work, but it can sometimes backfire -- so be aware of that.
Timing is important too. The best time to increase your rates is at the beginning of a new year, because it coincides with all sorts of changes and may be easier for them to adjust to.
Or if you are shifting the way you work together or the scope of the work, take advantage of that change to introduce a different type of pricing that has the effect of increasing your rates.
For example, if one of your first clients is still paying hourly (and a very low hourly rate at that, which is very common), you can use a new year (or a new month) to introduce a new way of working and a new way of pricing the work. That way, it won’t feel like they’re getting the same thing just paying more for it.
That said, at a high level, I recommend that you:
- Give your client ample notice about any rate increase — a month in advance or longer is even better. Nobody likes surprises.
- Tell clients in real time (by phone or video) vs. email. This shows you’re confident about delivering the message and that you value their response.
- Prepare by writing out what you want to say so that when you deliver the message “live,” your talking points keep you focused.
- Get to the point as quickly as possible. The more you talk, the more you may find yourself sounding less confident.
- Customize each conversation based on your knowledge of the client, the work you do for them and the communication approach that works best with them.
- Be prepared with a response if your client pushes back or asks why you made this decision or how you came to X-dollar amount. Again, write it out in advance so you can share your answer confidently.
And finally, be ready to compromise or walk away from the client refuses to accept a rate increase. If you’re open to negotiating, have a number in mind that you will not go below -- that’s your floor. You can offer that amount to the client or, even better, ask them what they think is fair and then share your number if the client’s number is lower.
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Want more? Check out my newest ebook, Worth It: How getting good at the money talk pays off and subscribe to the Marketing Mentor Podcast.